On April 28, 2017, the last legal step for the withdrawal of the Encompass Insurance Company (“Encompass”) from the Massachusetts personal automobile insurance market occurred. On that day, Acting Commissioner Gary D. Anderson approved Encompass’ plan of withdrawal subject to three conditions.

June 30, 2017 withdrawal from the Massachusetts personal lines market

Encompass submitted its plan to withdraw from Massachusetts personal lines market with the division of insurance (“division”) under CAR Rule of Operation 38 (“CAR Rule 38”) on March 2, 2017. Per its plan, Encompass’ would withdraw from the Massachusetts private passenger automobile market effective June 30, 2017. Encompass, which is a subsidiary of Allstate, informed the division, however, that as part of its plan, it would keep its licenses to preserve the option of re-entering the Massachusetts personal lines marketplace in the future.

The Hanover assumes responsibility for Encompass’ agents and insured

The withdrawal plan also notified the division that The Hanover Insurance Company (“The Hanover”) had agreed to act as its replacement carrier for most of its existing agents and insureds if Encompass’ withdrawal was approved. The plan noted that affected Encompass policyholders with renewal effective dates on or after July 1, 2017, would receive a new policy from The Hanover. See Agency Checklists article of March 21, 2017, “The Hanover Enters Into Replacement Carrier Agreement For Encompass’ Massachusetts Personal Lines Business.”

No carriers request division hearing on withdrawal plan

On March 7, 2017, under CAR Rule 38, the division formally notified Commonwealth Automobile Reinsurers (“CAR”) of Encompass’ intent to withdraw from the Massachusetts private passenger automobile market. In turn, on March 10, 2017, CAR notified its member insurers, by Bulletin No. 1033, of their right to request a hearing before the division within 10 days of the March 7, 2017 notice to CAR by the division of Encompass’ proposed withdrawal.

No insurers requested a division hearing on withdrawal plan

Encompass must make full settlement of all financial obligations to the MAIP

Under CAR Rule 38, Encompass’ plan of withdrawal had to include a “full settlement of all financial obligations to the MAIP [Massachusetts Automobile Insurance Plan], as well as provide that either Encompass will continue to service its existing MAIP business “until the expiration of the three-year assignment period for each of its MAIP assignments, or make other arrangements for the service of such assignments.”

Encompass’ plan provided for its Rule 38 obligations directly and by the agreement with The Hanover acting as Encompass’ replacement carrier for Encompass’ agents, voluntary insureds and assigned risks.

Relying upon the representations made in Encompass’s withdrawal plan, Acting Commissioner Gary Anderson determined that the requirements of CAR Rule 38 had been met as to its obligations to CAR and additionally that Encompass’s withdrawal would “not have an adverse effect on the orderly and equitable conduct and operation of the Massachusetts private passenger motor vehicle insurance market.”

However, the Acting Commissioner’s approval did have conditions as to Encompass fulfilling its ongoing obligations under its withdrawal plan.

Three conditions in approval of the Encompass withdrawal plan

Under the withdrawal plan and CAR Rules Encompass does have continuing obligations to certain insureds and the MAIP. Accordingly, Acting Commissioner Anderson approved the withdrawal plan subject to three conditions: These conditions were:

Encompass will comply with all terms and conditions of the plan filed with the division.

Encompass shall continue to be responsible for its share of the costs of the run-off of the pooling mechanism employed by CAR prior to the implementation of the MAIP.

Encompass shall continue to furnish to CAR on a timely basis all statistical data and other information concerning or relating to the private passenger motor vehicle business written by it prior to the date of the plan’s approval in such form and detail as CAR may require

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About Owen Gallagher

Owen Gallagher is an experienced insurance litigator as well as a certified mediator and arbitrator who specializes in insurance industry disputes. His interest and affinity for insurance began at a young age working the counter at his father’s assigned risk agency in Roxbury. Over the course of his career, Owen has argued a number of cases in the Massachusetts Supreme Judicial Court and has helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth. Owen can be reached here.

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